It’s unfortunate but criminals use crises as the time to increase their attempts to scam the unsuspecting and vulnerable. Any national crisis, such as the COVID-19 pandemic, creates an atmosphere of fear, making people more susceptible to scams. Criminals use this time to get personal financial information and steal your money.
The IRS has announced what they call the “Dirty Dozen” tax scams for 2020 in an effort to educate the public and warn against these tactics. Everyone is easy prey in this environment, and you should be on the lookout all the time for these suspicious activities. Spread awareness and help protect others who may not know about these scams.
“Dirty Dozen” Tax Scams
Be hypervigilant to these tax scams:
Phishing is always on the list of scamming techniques. Phishing is the act of using email that deceptively looks like it is from a legitimate source to hook you and then gets you to release personal information. Be alert to emails that can potentially be fake.
The IRS Criminal Investigation is seeing a huge increase in phishing schemes that are through emails, letters, texts, and links. The schemes are using keywords like “coronavirus,” “COVID-19,” and “Stimulus.” These emails are sent to large numbers of recipients to get personal financial information, including account numbers and passwords. Do not succumb to emails asking for this information. The IRS will never contact a taxpayer about a tax bill, refund, or Economic Impact Payment by email. Never click on a link that purports to be from the IRS.
Scammers play on people’s charitable tendencies by making up charities that don’t exist. Most of the time, these schemes involve contacting via phone, text, social media, email, or even in person. The fictitious charity names are similar to real, legitimate charities so people are tricked into sending money or providing personal information. Criminals use a variety of tactics for these scams, including working for the IRS to assist victims in filing casualty loss claims and get tax refunds. A legitimate charity will always provide their Employer Identification Number (EIN), if you request it. You can find qualified charities with the search tool on IRS.gov.
Because social media is so widely used, it has become a way for criminals to operate successful scams during COVID-19. Using social media, anyone can communicate and share information with anyone else on the internet. A scammer can pretend to be in your family, a friend, or a co-worker. These social media scams have progressed to tax-related identity theft. The scammer gains trust by impersonating someone you think you know by getting into emails and cell phones in order to then contact friends and family with fake emails and text messages. For example, these communications might solicit small donations to fake charities in an effort to obtain personal financial information.
EIP or Refund Theft
The pandemic has created a new opportunity for scammers through the Economic Impact Payments provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Criminals are filing false tax returns to get refunds into incorrect bank accounts or mailed to wrong addresses.
Unfortunately, senior citizens are always prey for criminals. Being targeted and victimized by scammers, seniors are susceptive to tactics that instill fear. As more seniors are comfortable with using technology through email and being active on social media, they are even more vulnerable to fraudulent activity. Seniors need to be alert to fake emails, text messages, websites, and social media attempts to steal their personal information.
Non-English Speakers as Targets
Scammers are targeting groups of people with limited English proficiency by impersonating the IRS. These are usually threatening in nature and many times are phone “robocalls”, but can also be a real person. The criminal may have some of the taxpayer’s information so the call seems more legitimate. The call may threaten the victim with jail time, deportation, or revoking their driver’s license. Taxpayers who are recent immigrants can be very vulnerable and should not engage the scammers.
Unprincipled Tax Preparers
It’s very important to work with a tax preparer who is honest and provides high-quality service. Each filing season finds some dishonest preparers that harm innocent taxpayers. Unscrupulous preparers may target those people without a filing requirement and may or may not be due a refund. The preparer may promise high refunds by claiming fake tax credits, including education credits, the Earned Income Tax Credit (EITC), and other credits. You should avoid a tax preparer who asks you to sign a blank return or promises a big refund before looking at the taxpayer’s records or charges fees based on a percentage of the refund.
Always avoid “ghost” preparers who don’t sign the tax return. These preparers will expose clients to serious mistakes, possible tax fraud, and loss of refunds. During COVID-19, with so many offices closed, take particular care in selecting a credible tax preparer.
Offers in Compromise
Another scam that you should be aware of are offers to resolve tax debt cheaply through an Offer in Compromise (OIC). OIC is available through the IRS to qualified taxpayers, but the criteria are stringent. Unscrupulous companies contact taxpayers who don’t qualify for the OIC in order to collect a fee from people who are already struggling with debt. The IRS has a legitimate program and assists many taxpayers reduce their tax bill. But, not everyone qualifies for the OIC. For example, in 2019 there were 54,000 OICs submitted to the IRS and the agency only accepted 18,000. Use the free online Offer in Compromise Pre-Qualifier tool to see if you qualify. This tool allows you to confirm eligibility and provides an estimated offer amount. Taxpayers can apply for an OIC without third-party representation. But, if you need help, you should be extremely cautious about who you hire.
Fake Payments with Repayment Demands
In this scam a criminal obtains a taxpayer’s personal data including social security number or tax identification number and bank account information. It is an elaborate scheme. The scammer files a fake tax return and has the refund deposited into the victim’s bank account. After the direct deposit is made, the scammer calls the victim and poses as an IRS employee. Then, the criminal tells the taxpayer that an error has been made and the IRS needs the money returned immediately. And, the scammer instructs the taxpayer to buy specific gift cards for the amount of the refund.
The IRS will never request payment by a specific method. There are many options for payment and a process through which the taxpayer can question the amount of tax they owe the IRS. Anytime you receive a call out of the blue demanding a refund repayment, call your banking institution and the IRS.
Tax Scams Involving Payroll and Human Resources
Employers, taxpayers, and tax professionals need to be on the lookout for phishing that steals Form W-2s and other tax information. These scams are called Business Email Compromise (BEC) or Business Email Spoofing (BES). The two most common scams are the gift card scam and the direct deposit scam. The gift card scam uses a compromised email account to send a request to purchase gift cards in different denominations. The direct deposit scam has access to the victim’s email account and impersonates the potential victim in order to change the employee’s direct deposit information so the deposit is rerouted to an account the criminal controls.
For Direct Deposit and other BEC/BES variations, go to the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) where you can file a complaint. The IRS requests that Form W-2 scams be reported to: email@example.com with Subject: W-2 Scam.
Ransomware is becoming more prevalent in the world of cybercrime. Ransomware is malware that targets human and technical weaknesses to infect a potential victim’s computer, network, or server. It is invasive software that is often downloaded inadvertently by the user. Once it is on your computer, it tracks keystrokes and computer activity. It looks for critical and sensitive data and can impact entire networks. Be aware of phishing emails that trick you into opening a link or attachment. These scams can also send ransom requests in the form of pop-up windows. Sometimes the criminals look for computer vulnerabilities where human error is not needed for the malware.
The IRS has advised tax professionals and taxpayers to use the free, multi-factor authentication feature offered on tax preparation software products. Multi-factor authentication is free and an easy way to protect from data thefts.
Schedule a Consultation with Us
Our CPAs in Raleigh are knowledgeable about potential scams that are occurring during the COVID-19 pandemic. If you need help understanding communication you have had from any source you may be skeptical about, we are here to help. We serve Raleigh, Durham, Cary, Wilson, Wake Forest, and surrounding communities. Call us at (919) 872-0866 or complete the form below to schedule a consultation.